Menu 
Share Button

Charitable Contributions


Definitions

  • Charity:

    Items given to organizations (tax deductible)

  • Gifts:

    Items given to individuals ((needy family) (non-deductible)

  • Political contributions:

    Items given to candidates (non-deductible)

Taxpayers who do not itemize deductions may not deduct charitable contributions. Also, deduction is allowed only for the tax year in which the contribution is made.


General

Cash or FMV of Property

A gift must be in the form of cash or (FMV) property. The deduction for contributed property is usually measured by the lessor of property’s basis or its fair market value at the time the contribution is made.

Maximum Allowable Deduction

The maximum allowable deduction for an individual is:

  • Cash = 50% of adjusted gross income
  • FMV Property = 30% of AGI for gifts of long-term capital gain property to public charities

Appreciated Property

Special rules apply to the deductibility of gifts of long-term capital gain property.

Deduct at Fair Market Value

Appreciated property (property having a value greater than its basis) is deductible at its fair market value if it was held over one year.

30%/50% AGI Limit

A taxpayer may deduct the full value of long-term capital gain property (without paying capital gains tax on the appreciation), but the total value of such property deducted may not exceed 30% of taxpayer’s adjusted gross income for gifts to a public charity.

Combination Rules

Total deduction for all gifts (cash, property etc) may not exceed 50% of adjusted gross income.


Consideration for Contribution

The taxpayer may only deduct the excess contribution over the consideration received. For contributions more than $75 Charitable organizations must provide the donor with a written statement that estimates the value of deductible portion of payment.

For eg. Jack buys a ticket to a charity ball for $150, and actual value of attending the ball was $50. Jack can only take a charitable deduction of $100 ($150 – $50).


Contribution of Services

A taxpayer may not deduct the value of the time or service donated. However, he may deduct out-of-pocket expenses incurred as a result of giving services to a charity. For i.e. parking, tolls, cost of gas etc.


Students living in Taxpayers Home

A charitable deduction may be taken for the expense incurred when the taxpayer takes into home a full-time student (e.g. exchange student). The deduction is upto $50/month and may not be beyond the twelfth grade.


Substantiation of Documents

Taxpayer must always keep records like the bank statement, letter pf acknowledgement from Charities, to substantiate their deductions.

Share Button